A manager needs to monitor:
The Phillips Curve shows an inverse correlation between (unemployment) and (inflation) using data from 1861 - 1958. It implies the Fed could achieve low unemployment at the cost of high inflation.
The Phillips Curve broke down in the 1970s when Lyndon Johnson inaugurate Great Society social programs while the Fed kept interest rates low.
So is there a trade off between inflation and unemployment? Milton Friedman and Edmund Phelps says:
Describe major takeaways briefly.
Even if there is no short run they still have to have high inflation rates in the long run. a banker is hesitant to lend money for a long period of time if he is unsure of what inflation will be.
prices of inputs and outputs
Input prices are the prices of goods that a firm purchases to carry out production. output price refers to the price of the finished products produced by the firm; though it is the price of the product after the processing.
It’s easier to pass on costs increases when the following is true:
Describe major takeaways briefly.
Long term contracts should often include price adjustment clauses. adjustment clauses should be carefully drafted to insure that both parties benefit over the widest possible range of eventualities.
Describe major takeaways briefly.
He consumer price index is not perfectly accurate, but it does a good job of showing changes in the inflation rate. for business analysis purchases custom created weighted averages are usually more appropriate
A business for whom raw materials constitute a major cost should hedge against the risk of sharp increases in the price of raw materials by:
Explan each of the following terms in your own words. The author explains the terms in the textbook. If necessary, you may also Google the term on the Web. Good resources include:
Explain the terms in your own words briefly.
Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.
is a measure of the average change over time, in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas.the current index is 296.171
measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services.
graphic representation of the economic relationship between the rate of unemployment (or the rate of change of unemployment) and the rate of change of money wages.
refers to the manufacturing and production capabilities that are being utilized by a nation or enterprise at any given time. It is the relationship between the output produced with the given resources and the potential output that can be produced if capacity was fully used
is the simultaneous appearance in an economy of slow growth, high unemployment, and rising prices. Once thought by economists to be impossible, stagflation has occurred repeatedly in the developed world since the 1970s. Policy solutions for slow growth tend to worsen inflation, and vice versa.
Describe the characteristics of the following events briefly.
The author writes the Phillips Curve broke down in the 1970s. Elaborate.
The curve broke down as policy makers began to use it. the decade of the 1970s showed increasing unemployment and inflation as much as earlier dubbed as stagflation.